60 seconds on why smart beta's appeal is growing
What is smart beta?
Smart beta is a new investment trend proving attractive to some investors who are seeking an alternative to traditional active management.
Smart beta strategies are effectively diversified equity portfolios that are systematically rebalanced; targeting factors that are expected to outperform in the long-run or reduce risk.
Three things to know about smart beta:
- Smart beta strategies require as much due diligence as active fund management.
- Smart beta strategies can result in exposures that are quite different from the market in terms of stock, sector and regional concentration.
- Smart beta portfolio characteristics can change drastically on rebalancing dates.
Smart beta strategies never outperform all the time; investors need to understand the exposures they are buying into as well as the risks they are taking on when investing in smart beta products.